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Are you contemplating investing in real estate? However you don’t have enough money to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to find a land that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be glad to help you out! There are a few variations that could be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.